(Disclosure: The following represents my opinions only. I am not receiving any compensation for writing this article, nor does Hydra Capital have any business relationship with companies mentioned in this post. I am long VLE.TO, POE.V, SDX.V, PLU.V).
SDX Energy Finds Encouragement at South Disouq
Yesterday SDX Energy (SDX.V) announced that it has found 65 feet of interpreted net gas pay in the shallowest target interval of its SD-1X exploration well in the South Disouq block, Egypt. SDX has a 55% interest in the well and drilling to deeper target horizons is ongoing. Those deeper targets are hoped to contain oil, which could make the apparent discovery even more valuable. It's too early to tell just how big the SD-1X discovery is (or what it's worth), but SDX says that work is underway to quantify the potential gas volumes involved. According to one analyst report, there is a gas pipeline about 11 kilometres away that SDX may be able to use for transportation. Perhaps the most encouraging part of the press release in my mind is that the target formation was encountered "on prognosis" which means that it was encountered at the depth that it was expected to be... that might not seem that significant to most people, but when you are drilling exploration wells in areas with low well density, seismic interpretations can change significantly, so finding what you wanted to find, at the depth you wanted to find it, should build confidence in the overall pre-drill interpretation of the size, shape, and depth of the target. More data is required, but at this stage it would seem that SDX has a bit of good luck on its side and may have room to run.
Plateau Uranium Looks Towards an Offtake deal, Maybe...
Plateau Uranium (PLU.V) announced that it has signed a letter of intent with a potential off-taker for a small portion of its anticipated production from the Macusani Project. The LOI is non-binding, non-exclusive, and dependent on establishment of final terms within the next twelve months, so it's really not much of a deal at all. The indicative average price of the offtake deal is US$42/lb U3O8, which is a nice premium to the ~US$23/lb spot price, but it's so early stage that all it should do is serve to remind people that PLU has a project that appears to be quite economic at a uranium price that most would consider a minimum target to incentivize the new production that the world will need in just a few year's time.
Pan Orient Should Be Getting Ready to Drill at East Jabung...
Pan Orient Energy (POE.V) announced that it plans to start drilling the somewhat-delayed AYU-1 well in late April. Heavy rains created operational and logistical challenges that have pushed the spud date back about a month, but this is one of the most exciting targets on my radar for the year. Pan Orient still has around $1/share in cash as well as a bit of production in Thailand and an pretty good-looking SAGD project at Sawn Lake, Alberta. Success at AYU-1 (i.e., an oil discovery) could be a windfall for investors or a grand disappointment, so place your bets accordingly...
Valeura Should Spud the First Deep Well with Statoil This Quarter
There's really nothing new to report on Valeura Energy (VLE.TO) but a recent vote granting expanded powers to President Erdogan recently passed by a narrow margin. I've linked to a CNN article and interview on the topic here, which I would encourage people interested in the country to view. I don't envy Erdogan's job in governing a nation as complex as Turkey, but the vote should arguably create the perception of Erdogan tightening his grip on the country which actually caused the Turkish Lira to rally briefly, presumably under the impression of the potential for increased "stability". At the end of the day, as an investor in VLE, my main concern when it comes to Turkey is energy (i.e., gas) demand growth. On a per capita basis Turkey lags far behind other more well developed gas markets in terms of gas consumption, so I'm fine to ride VLE here all else being equal. The first deep well with Statoil should spud sometime this quarter and it would seem that VLE has put in its lows in the 65-70 cent range for the time being. Will optimism start to creep in again when the first deep well gets underway? Here's hoping.
Foran Suspends Drilling at McIlvenna Bay Target
Foran announced that it had to shut down drilling operations prior to reaching target depth at its VMS exploration target next door to the McIlvenna Bay deposit due to the spring thaw. Investors, including myself, were undoubtedly disappointed by the news, and some might even wonder why management cut it so close with respect to the weather window. The company says it will run a borehole EM survey and start drilling again after the thaw. Foran remains an interesting copper-zinc project, but the weakness in both metals isn't helping anyone in the sector at the moment. Foran plans to conduct a "technical review" of its previous PEA on the project, with Micon International engaged to do the work. For now at least, Foran has been put back on the shelf where hopefully it doesn't gather too much dust before interest in copper-zinc stories returns. Perhaps the planned resource definition drilling program at Bigstone this summer will provide a new angle of investor interest if the copper price cooperates.